FDIC Greenlights Three-Year Phase-In for CECL’s Regulatory Capital Effects

The FDIC today voted to approve a final rule giving banks the option to phase in over a three-year period the day-one adverse effects of the Current Expected Credit Loss standard on regulatory capital. The CECL standard, which goes into effect in 2020 for SEC registrants, 2021 for non-SEC banks that are FASB-defined “public business entities,” and 2022 for all other banks, requires an estimate of expected credit losses over the life of the portfolio to be effectively recorded upon origination.

ABA has long raised concerns about CECL’s effects on specific lending products and on banks, particularly community banks, and noted that the phase-in does not go far enough to ensure CECL will function as intended. “Banks have long been concerned about CECL’s cost and impact on our ability serve our customers and communities, particularly in times of economic stress,” said ABA President and CEO Rob Nichols. “That’s why ABA believes CECL must be delayed until a quantitative impact study can be conducted and the economic consequences of the accounting standard are fully understood.”


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